China Evergrande’s regulatory woes continue with failure to deliver 2022 annual report on time as debt restructuring deal faces opposition

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by Tracy Qu at

Debt-ridden property developer China Evergrande Group said it will not be able to deliver its 2022 annual report on time, citing major changes in the company’s operating conditions since the second half of 2021.

Evergrande made that disclosure on Friday in a Shenzhen Stock Exchange filing. The company said a large number of procedures have been added to its audit process, leading to the expected delay in completing its annual report by the end of April.

This setback comes nearly two weeks after US law firm White & Case announced on April 10 an initiative that could complicate the Chinese company’s recent deal to restructure US$19.15 billion in offshore debt.

White & Case on April 14 organised a group of Evergrande creditors holding offshore debt who are affected by the restructuring to oppose that proposed scheme, which followed “consultation and negotiation with a limited subset of its creditors”.

Those creditors have not signed off on the proposal, which grew out of discussions with an ad hoc group of bondholders, according to a report earlier this week by Chinese media Caixin, which cited unnamed sources.

Evergrande said earlier this month that creditors, who represent over a fifth of its US$13.9 billion existing bonds and a third of the US$5.23 billion bonds guaranteed by the company, have signed three separate agreements to “cooperate in order to facilitate the implementation of the proposed restructuring”.

The Shenzhen-based developer’s latest regulatory lapse underscores the existential crisis at the company, which has been grappling with almost 2 trillion yuan (US$290.4 billion) in liabilities and defaulted on some US$20 billion in offshore borrowing. The firm has also failed to submit its accounts to the Hong Kong stock exchange since late 2021.

China’s two main stock exchanges have also taken Evergrande to task for breaching its listing obligations, as its major mainland property development unit failed to publish its accounts in time for shareholders and outside investors.

That onshore unit, Hengda Real Estate Group, failed to publish its 2021 annual report by the April 30 deadline last year, prompting the Shanghai and Shenzhen bourse operators to chastise the developer and two of its top executives, according to filings late on Wednesday.

Hengda said it will accept the disciplinary actions imposed on the firm, as well as actions against its chairman and general manager Zhao Changlong, and chief financial officer Qian Cheng.

“We believe Evergrande remains at high risk of liquidation,” said Leonard Law, a credit analyst at Lucror Analytics.

Founded in 1996 by entrepreneur Hui Ka Yan, Evergrande rapidly expanded to become the world’s largest property developer. A liquidity crisis that snowballed in 2021 led to the company lurching from one crisis to another, turning it into the world’s most indebted property developer and the poster child of China’s property crisis.


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